Pakistan factor: Why West Asia war hurt Indian airlines more than foreign ones

Why in the News

International air passenger traffic to and from India fell 9.1 per cent year on year in April to June 2026, to 1.72 crore, after the West Asia conflict closed large parts of Gulf airspace. The decline was driven entirely by Indian carriers, whose combined international traffic fell 26.6 per cent. Foreign airlines carried 6 per cent more passengers than a year earlier. India has barred its own carriers from Pakistani airspace since late April 2025, and Pakistan’s reciprocal closure applies only to them. The result is that a shared shock produced an asymmetric outcome, transferring market share on India’s own international routes to airlines that could still fly the short way west.

How does an airspace ban change an airline’s operating economics?

1. The right involved: A carrier overflies a third country under the International Air Services Transit Agreement of 1944 or under a bilateral permission, and either can be withdrawn at short notice.
2. The detour cost: A closure forces a longer track, which adds block hours, fuel burn and crew duty time to every affected departure.
3. The payload penalty: A longer sector makes the aircraft trade revenue payload for fuel, or forces a technical stop, and either outcome erodes the margin on the route.

What does the passenger data show?

1. Total volume: Total international air passenger volume to and from India fell 9.1 per cent year on year in April to June, from 1,89,12,598 to 1,72,00,140, in an analysis of Directorate General of Civil Aviation (DGCA) data.
2. Indian carriers: Their combined international passenger numbers fell 26.6 per cent, from 87,34,038 to 64,14,896.
3. Foreign carriers: Their cumulative passenger base rose 6 per cent, from 1,01,78,560 to 1,07,85,244.
4. Market share shift: Foreign operators expanded their share of India’s international traffic to 62.7 per cent from 53.8 per cent, and domestic carriers dropped to 37.3 per cent from 46.2 per cent.

Why did the loss fall on Indian carriers alone?

1. Their biggest market closed: Flights to the United Arab Emirates and other West Asian markets, the largest destinations for Indian airlines, were heavily curtailed.
2. The damage spread beyond West Asia: Indian carriers were forced to cut flights to destinations well outside the region, under war related financial pressure and the standing ban on flying over Pakistan since late April 2025.
3. The route economics broke first: Air India and IndiGo curtailed their west bound network because the unavailability of Pakistani airspace made some services financially and operationally unviable to run.
4. The pressure predated the war: Both leading carriers were already taking longer routes and adding refuelling halts on west bound services from their Delhi hub before the conflict began in late February, and some routes had been suspended outright.

How did foreign carriers turn the same shock into share?

1. They kept the short way west: Foreign carriers faced the same surging jet fuel prices, and many held one decisive advantage in the continued availability of Pakistani airspace.
2. Spare capacity was redeployed: Once the war began, carriers from Europe and other regions west of India increased operations to and from the country using aircraft freed by their own curtailed West Asia flying.

Which Indian airlines lost most?

1. IndiGo: Remained the largest Indian carrier on international routes with a 15.4 per cent decline to 33.4 lakh international flyers, and an international market share slipping to 19.4 per cent from 20.9 per cent.
2. Air India: Fell 27.2 per cent to 19.3 lakh passengers, with its international market share contracting to 11.2 per cent from 14 per cent.
3. Air India Express: Its footfall halved to 8.34 lakh, since its network is highly concentrated in West Asia, and its share fell to 4.8 per cent from 8.9 per cent.
4. The Air India group: Combined international traffic fell 36.3 per cent year on year to 27.61 lakh in the quarter.
5. SpiceJet: Recorded the sharpest percentage fall at 56 per cent, to 1.38 lakh international flyers, with share contracting to 0.8 per cent from 1.7 per cent.
6. Akasa Air: The only Indian airline to register higher international passenger numbers, growing on a low base through an expanding fleet.

Challenges to Indian carriers on international routes

1. Gulf hubs capture the through fare: Foreign carriers connect Indian cities to the West over their own hubs and book the full journey revenue. Eg. Emirates, Qatar Airways and Etihad carry a large share of India to Europe and North America traffic over Dubai, Doha and Abu Dhabi. Fix. Build a domestic transfer hub with matched arrival and departure banks, and price transfer charges to reward connecting traffic.
2. Wide body fleet shortage: Non stop long haul flying needs aircraft Indian carriers do not have in sufficient number. Eg. Air India’s wide body cabin refit programme has run behind schedule because of queues at overseas retrofit facilities. Fix. Expand domestic maintenance, repair and overhaul capacity so heavy checks and retrofits are not queued abroad.
3. Fuel taxation: Aviation turbine fuel sits outside the goods and services tax and carries high state value added tax, so the largest cost line is not creditable. Eg. Fuel accounts for about 40 per cent of an Indian airline’s operating cost. Fix. Bring aviation turbine fuel under the goods and services tax with input tax credit for carriers.
4. Ageing bilateral entitlements: Traffic rights negotiated years ago cap Indian carriers in some markets. The same rights leave foreign carriers entitlements they can deploy at short notice. Eg. India’s bilateral seat entitlement with the United Arab Emirates has been unchanged for over a decade. Fix. Renegotiate bilaterals with entitlement tied to actual utilisation and reciprocal hub access.
5. Financing and leasing sit offshore: Most aircraft are leased through foreign lessors, so rentals and repossession law lie outside Indian jurisdiction. Eg. The aircraft leasing framework at Gujarat International Finance Tec-City (GIFT City) remains small relative to the fleet on lease. Fix. Deepen the domestic leasing regime and fully operationalise the Protection of Interests in Aircraft Objects Act, 2025 giving effect to the Cape Town Convention.

Conclusion

The quarter’s traffic decline was distributed by airspace access rather than by exposure to the war, so Indian carriers absorbed the whole of a shock both sides faced. The share transferred to foreign operators is not automatically reversible, since network presence and slot use tend to persist once established. Recovery depends on the reopening of Pakistani airspace to Indian carriers and on the restoration of West Asian capacity, neither of which is within the sector’s control.

“[2024, GS3, 15 marks] What is the need for expanding the regional air connectivity in India? In this context, discuss the government’s UDAN Scheme and its achievements.”